Thornburg Mortgage Debt Hit with Margin Calls

Thornburg Mortgage, a lender trying to recover from tough credit market conditions, said on Thursday it has faced more than $300 million of margin calls in the last two weeks following a sudden deterioration in mortgage market conditions.

Shares fell $2.79, or 24.2 percent, to $8.75 in pre-market electronic trading.

Thornburg in its annual report filed with the Securities and Exchange Commission said the calls were tied largely to $2.9 billion of "super-senior, credit-enhanced mortgage securities" that carry "triple-A" ratings and are backed by below-prime "Alt-A" mortgages.

Thornburg said it has yet to realize any losses on these securities but that their market value has fallen 10 percent to 15 percent this month amid "deterioration in the liquidity for these securities and increased difficulty in obtaining market prices."

As a result of this decline, Thornburg said it had "reduced readily available liquidity" to meet future margin calls and might need to "selectively" sell assets if it cannot use cash to meet them.

The Santa Fe, New Mexico-based company nevertheless said it remains "optimistic over the longer term" and said the credit quality of its loan portfolio is consistent with its current reserves for bad loans.

Thornburg concentrates on adjustable-rate jumbo mortgages. It lost $1.08 billion in last year's third quarter and suspended its dividend as credit markets tightened and many investors stopped buying jumbo mortgages. Thornburg recovered to post a $64.8 million fourth-quarter profit and reinstituted a dividend.

Shares of Thornburg fell to $11.00 in pre-market trading after closing Wednesday at $11.54 on the New York Stock Exchange.

Copyright 2009 Reuters. Click for restrictions.